Some of the main issues facing the cards business in the Middle East. Paul McNamara shares some thoughts.
As the editor of the region's only banking magazine I get to talk to a lot of banks, central banks, card issuers as well as a lot of ancillary service providers throughout the year.
Of late, there have been two main themes that have dominated the conversations of senior bankers in the region. The first concerns the issue of human capital; how to recruit and retain the best people around.
The second concern relates to the issue of security and compliance.
The crooks get smarter every day. That means that the rest of us have to get smarter every day too just to stay ahead. This second concern goes right to the heart of what card security is all about.
Technology, while offering untold advantages to all businesses, also offers a sense of remoteness and covertness to the bad guys. Our job is to make sure that we don't let our guard down and let the bad guys in.
Technology provides us the answer here also.
There can be no doubt that technology is driving all of our businesses faster and faster. As long as we remain in the driving seat as our businesses move faster, the there is nothing to fear. But the moment that we adopt a passive role and let ourselves be chauffeured then we lose our sense of destiny.
How does this apply to the cards business in the Middle East? My belief is that as we roll out new card technologies, new applications and new solutions, as long as we are being driven by our business goals rather than by the possibilities that technology offers us, then we will not go far wrong.
We should not implement new solutions just because we can and because we can afford them. We should implement them because they fit in with a strategic vision that we have for our business.
Last year at Cards Middle East 2005 I asked some of the leading players what the next big thing was.
One of them summed card security up neatly by using this example.
In the far past, the security of our transaction depended on something we had (a card) and something could do (sign a document). In the recent past, the security of our transaction depended on something we had (a card) and something we knew (a pin number). But as the bad guys get smarter then this needed to change to something we had (a card) and something we are (a fingerprint or a retinal print or some other biometric marker that could not be copied).
In the MENA region, vendors simply do not check signatures in cards. In the UK, USA, Europe, they always do.
Chip and pin will be a step in the right direction for the region.
The bad guys will not go away, they simply move their playground, and move their fraud to some other link in another chain.
Indeed over the past twelve months I have seen a number of 'applications of the future' where leading cards exponents have 'must have solutions' for every eventuality.
How do we choose between them? Let your guiding principle be what your business needs rather than what the vendor is trying to sell you.
The Middle East, as we know, has some unique issues to contend with. The lack of a credit bureau is a big deal and as the populations of the countries in the Middle East and the GCC in particular grow, then the need to a strong credit bureau becomes ever more pressing.
Another key factor that differentiates the Middle East from other regions lies in the area of Islamic finance. Of course it is booming in other areas, most noticeably Malaysia, but the real goals are being scored right here.
The problem, and it is a big problem, is that the very nature of Islamic finance makes the business of credit cards in particular rather difficult or costly.
Risk management, anti-money laundering and compliance are now core tenets underpinning the structure of every bank in the region. Fraud mitigation and exposure control are key elements of this. Credit cards, debit cards and more are all central to this.
Very shortly the central bank in most countries will require that banks don't simply pay lip service to these issues. They will need to demonstrate real compliance and ability to show that they are ahead of the game.
The region will be a whole lot safer for all of us when the new regime begins.
© Banker Middle East 2006
